The auditor designs and performs a combination of tests of controls and substantive procedures to obtain reasonable assurance that the financial statements are fairly stated when control risk
A) is assessed above the maximum.
B) is assessed below the maximum.
C) cannot be assessed.
D) none of the above

Question

Quizplus · Accepted Answer

When control risk is assessed below the maximum, the auditor can rely on the effectiveness of the client's internal controls and perform fewer substantive procedures. As a result, the auditor can design and perform a combination of tests of controls and substantive procedures to obtain reasonable assurance that the financial statements are fairly stated. When control risk is assessed above the maximum, the auditor may need to perform additional substantive procedures to obtain more assurance. When control risk cannot be assessed, the auditor will still need to perform some procedures to obtain reasonable assurance, but will likely need to rely more heavily on substantive procedures.

The Auditor Designs and Performs a Combination of Tests of Controls